This proposal addresses NIH PA-00-052, Higher-Order Cognitive Functioning and Aging, in particular examining decision-making processes in older adults. As people age, their competence at various decisions is questioned more often, but research on how to measure decision-making competence (DMC) reliably and validly in older adults is almost non-existent. This research aims to develop measures of three important aspects of DMC (comprehension, consistency, and insight) and to compare younger (25-45 years), young-older (65-80 years), and old-older (81-100 years) adults' performance in simple and complex decision contexts. This application has been improved substantially as a result of previous review. Our hypothesized latent structure model of DMC has been revised so that it makes more sense theoretically and we have added two behavioral measures of decision style to the construct validation battery. We have considered in more detail how decision processes might differ as a function of cultural heritage. We have clarified the rationale underlying the definitions and measures of each competence dimension and have addressed concerns about assessing external validity with clinical assessments. Three studies will be conducted to develop the DMC Assessment Tool: Study 1 aims to finish developing a comprehensive battery of performance-based measures of cognitive processes that underlie older adults' DMC and to test the reliability of the measures; Study 2 aims to test the construct validity of the tool by comparing older adults' performance on the DMC measures with their performance on standard tests of cognitive abilities and using SEM to test our model of aging and DMC; Study 3 aims to test the concurrent validity of the tool by comparing older adults' performance on the DMC measures with performance on tasks of daily living and with the gold standard of gerontologists' judgments. Accurately identifying declines in DMC is particularly important for older adults because opportunities to recover from or compensate for poor judgments or decisions diminish over the lifespan. Developing context-sensitive, performance-based measures of DMC will offer a much-needed alternative to clinical interviews and will permit strategies regarding decision-aid interventions to be tailored better to individuals' needs.